What is a Look-Back and why are they ordered?

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Let me answer the second part first as it is the easiest.  Look-Backs are ordered by Federal and State Examiners when they believe that your institution’s Record Keeping, Suspicious Activity Monitoring or other parts of your Bank Secrecy Act (BSA) Program appear to have a possible issue.

 

What you are ordered to look for varies greatly, and how you accomplish the look-back will vary as well.  It is best if I give you a couple of examples.  During your examination your examiner may believe that you have not completed an

adequate risk assessment, you have not setup your Customer Due Diligence Process by different types of customers or are not monitoring correctly for High Risk Customers using High Risk product or it may be as simple as you are not monitoring all of your customer activity or all of your products.

 

Customer Due Diligence (CDD) look-back is an example of a record keeping look-back or remediation. This is ordered when examiners believe that there may be an issue with or you do not maintain adequate or have incomplete Customer Information Files (CIF).  Though not technically a look-back, it can be a very expensive project to complete.  The CCD look-back may also include a transactional look-back.

 

Transactional Look-Backs come in one of two terror filled types; Automated and Manual.

 

Manual Look-Back: A manual look-back is normally used in a low volume shorter period or when transactional data from the financial institution cannot be relied on.  This is the most time consuming of the two look-backs.  In this type of look-back, manual CIF records (let’s hope you made them) and the original payment orders from your core banking, SWIFT, Fedline, Fedwire, ACH or other payment systems are used as the transaction.  Manual cash logs are used or created to maintain a running thirty days to look for structuring.  Models of expected behavior are created and each transaction is looked at to see if it can be legitimized.  The number and types of models will depend on your types of products, types of customers, where you do business and your risk assessment.  Every transaction is considered suspicious until proven otherwise.

 

Automated Look-Back:   An automated look-back is a bit easier, but the same process above will apply.  Your existing BSA/AML systems cannot be used; a new BSA/AML system environment must be setup for the look-back.  Data is exported from systems and your manual CIF records will be used.  The same models and the same research process, again all transactions are considered suspicious until proven otherwise.

 

The ‘Financial Crimes Research Center’ is a Financial Crimes Research organization.   We conduct all types of look-backs at a fraction of normal costs.